It worries me where simple questions can lead. “What is an average bottle of whisky?”, I innocently asked myself recently when the Scotch Whisky Association produced their yearly pre-budget report on how damaging spirits duty is to their industry. While I’m on the fence on lower alcohol duty, and am still working out what I think of Minimum Unit Pricing, I always like to see what the SWA say about the world of whisky, especially when they’re pushing for duty to be lowered in budget. One of this year’s headline numbers was that 79% of the price of an average bottle is now tax. “That sounds like a lot,” I thought to myself, leading inevitably to my earlier question – “What is an average bottle of whisky?”.

Working out the price of an average bottle, given that 79% of the price is tax, isn’t particularly hard. Tax on a bottle of whisky, as we see it at the checkout, is made up of two pieces:

Duty – based on the physical quantity of pure alcohol in the bottle

VAT – based on the overall price of the bottle including duty

In this year’s budget spirits duty was frozen, to support the whisky industry according to the budget speech. As such duty remains the same as last year, at £28.22 per litre of pure alcohol, and VAT is 20% on top of the tax-free price of the bottle after duty has been added. I’ve put together a spreadsheet to show these figures over here, but here are the numbers in the area of the SWA’s average bottle, assuming a 70cl bottle of 40% whisky:

Pre-tax

Duty

Ex-VAT

VAT

Price inc-VAT

Total Tax

Tax as % of inc-VAT price

£ 0.00

£ 7.90

£ 8.90

£ 1.58

£ 9.48

£ 9.48

100%

£ 1.00

£ 7.90

£ 8.90

£ 1.78

£ 10.68

£ 9.68

91%

£ 1.68

£ 7.90

£ 9.58

£ 1.92

£ 11.50

£ 9.82

85%

£ 2.00

£ 7.90

£ 9.90

£ 1.98

£ 11.88

£ 9.88

83%

£ 2.50

£ 7.90

£ 10.40

£ 2.08

£ 12.48

£ 9.98

80%

£ 2.67

£ 7.90

£ 10.57

£ 2.11

£ 12.68

£ 10.01

79%

£ 2.75

£ 7.90

£ 10.65

£ 2.13

£ 12.78

£ 10.03

78%

£ 3.00

£ 7.90

£ 10.90

£ 2.18

£ 13.08

£ 10.08

77%

£ 4.00

£ 7.90

£ 11.90

£ 2.38

£ 14.28

£ 10.28

72%

I’ve highlighted a couple of rows above: let’s start with the darker yellow one. It shows the shelf price of a bottle where you are paying 79% tax – a bottle costing about £12.68. The 21% of the price remaining comes to a grand total of £2.67, which is split between all of the various people involved in producing and selling the bottle of whisky.

The way that tax is charged based on alcoholic content means that we get a very distorted total price. At the lower end the cost to the consumer is dominated by tax, with the minimum possible price being £9.48 (£7.90 of alcohol duty + 20% VAT with no money going to the seller), but, due to the non-changing nature of duty as price increases, it quickly becomes less significant:

As we can see on the graph, by the time we hit £25 for a bottle we’ve dropped down to about 50% of the bottle price being tax; we get to 30% at about £60 and approach 25% as we near £100.

I’ve looked for the source of the £12.68 figure for the average bottle of whisky and haven’t found much in the way of a derivation (an email asking for clarification has been sent to the SWA – no answer as yet), but assuming that it’s a simple mean it shows how powerful the lower end of the whisky market truly is. One of the things that we whisky geeks often forget is that we are a tiny part of the the whisky market, in both terms of how many bottles we buy, but also, it seems, by the amount we spend in total. Looking at the tax side of things, the relatively low tax rate for higher bottles is almost certainly ‘subsidised’ by the sales of cheaper bottles – not only does the single malt market exist as a side-effect of the demand for blended Scotch, but the prices we pay are artificially low thanks to the tax paid at the lower end. Which is an interesting (and almost certainly wrong) way of looking at things…

In honour of this, I found myself a cheaper than average bottle to try – Tesco Everyday Value Blended Scotch.

The price of this bottle was £11.50 and it’s the light yellow row in the table above – an impressive £9.82 of tax, 85% of the cost of the bottle. With only £1.68 to share amongst the entire supply chain I’m not expecting all that much – I suspect it’s almost entirely 3 year old grain, with a touch of malt and enough E150a to stop it looking like a bottle of vodka.

On the nose it’s very sweet, with lots of toffee, as well as a hit of tequila-like pepperiness and some creaminess. On the palate it’s got lots of spirit and not a lot of flavour. There’s a touch of lemon oil, some fudge, caramel, green leaf sourness and a bit of charcoal bitterness – a bit like a mildy fruity tequila, without the pepperiness. It hangs around for longer than you’d expect, with spirity notes and a touch of green apple bitterness the only particularly strong flavour.

Strangely, despite the description above this is not entirely objectionable. It’s boring and not particularly flavoursome, but it’s not actually all that bad, all things considered. Mixed with a bit of ginger or poured over ice this, as is almost certainly intended, will provide a generic whisky flavour to a drink without being distinctive. I mixed both it and some cheap vodka with Coke, and the whisky was still easily discernible – it may not have much flavour, but it certainly beats out the world’s biggest white spirit. Not bad considering how much money is actually making it back to the people who made it.

perhaps they could up their average cost if they factored in corporation tax? Mind you, hard to see how anyone can make much profit on £1.68. 25p profit for tesco I would guess, which I suppose is still 2%. Mind you, there normal margin is only 3% on turnover, so I guess it does makesense to then financially

Tony: In a way Minimum Unit Pricing might help things by kicking up the price of the-low end products and thus forcing a little bit more cash into the system. However, I suspect that the cash in question would go straight into the pockets of the supermarkets.

It now seems that the UK charged MORE tax on alc. than Israel after our reform. we have to pay 18 quid tax on a liter of alc. while you pay 28!!!! that is insane.
too bad we still get only a fraction of the inventory, and there are import taxes too. but in a few years we might be able to buy some whiskies here for cheaper… [we already can buy a few cheaper malts here than in the UK, but not most).

i hope tax is reduced in britain. 1.6 quid for a bottle without taxes, is insanely low. i am surprised whisky makers can still profit.